Real estate: Here’s why prices could drop sharply in the coming months

While the real estate market is panicking in places, prices could return to much more reasonable levels in the coming months. Here’s why.

It is the European Central Bank (ECB) which launched this alert on a housing market expected to see its prices fall sharply in the months to come.

Driven by extremely low credit costs and growing demand for housing, the rise in prices will therefore reverse soon according to ECB estimates. For the European Central Bank, the coming drop could bring the market back to a more logical proportion, estimating the residential real estate market currently overestimated by +15% on average.

According to site Surf finances Mag, in France, the real estate market is showing signs of slowing down, particularly for new homes. On the other hand, the rise in rates remains reasonable. According to the latest data from the Banque de France, the average rate reached 1.17% last April, compared to 1.1% in December 2021.

The fact remains that the ECB has indicated that it is necessary to “prepare for the scheduled end of free money (or almost)”, which even plans to raise its key rate, now negative, from July for the first time since a decade, as well as in September.

“A sudden rise in real interest rates could trigger a correction in real estate prices in the short term, with the current low level of interest rates making a marked reversal in house prices more likely,” the ECB further summarizes.

However, in France, borrowers are protected from sudden adjustments, as in the United States where mortgage rates are now above 5%. According to the ECB, “rate growth” could be “limited until next October at least” before a “larger rise expected at the beginning of next year”.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.